§ 10-7-305 — Adjusted premiums

(1) This section shall not apply to policies
issued on or after the operative date of section 10-7-305.1. Except as provided in
subsection (3) of this section, the adjusted premiums for any policy shall be
calculated on an annual basis and shall be such uniform percentage of the
respective premiums specified in the policy for each policy year, excluding extra
premiums charged because of impairments or special hazards, that the present
value, at the date of issue of the policy, of all such adjusted premiums shall be
equal to the sum of:

(a) The then present value of the future guaranteed benefits provided for by
the policy;

(b) Two percent of the amount of insurance, if the insurance is uniform in
amount, or of the equivalent uniform amount, as defined in subsection (2) of this
section, if the amount of insurance varies with duration of the policy;

(c) Forty percent of the adjusted premium for the first policy year;

(d) Twenty-five percent of either the adjusted premium for the first policy
year or the adjusted premium for a whole life policy of the same uniform or
equivalent uniform amount with uniform premiums for the whole of life issued at
the same age for the same amount of insurance, whichever is less. In applying the
percentages specified in paragraph (c) of this subsection (1) and this paragraph (d),
no adjusted premium shall be deemed to exceed four percent of the amount of
insurance or uniform amount equivalent thereto. The date of issue of a policy for
the purpose of this section shall be the date as of which the rated age of the
insured is determined.

(2) In the case of a policy providing an amount of insurance varying with the
duration of the policy, the equivalent uniform amount thereof for the purpose of this
section shall be deemed to be the uniform amount of insurance provided by an
otherwise similar policy, containing the same endowment benefit or benefits, if any,
issued at the same age and for the same term, the amount of which does not vary
with duration and the benefits under which have the same present value at the date
of issue as the benefits under the policy; except that, in the case of a policy
providing a varying amount of insurance issued on the life of a child under age ten,
the equivalent uniform amount may be computed as though the amount of
insurance provided by the policy prior to the attainment of age ten were the amount
provided by such policy at age ten.

(3) The adjusted premiums for any policy providing term insurance benefits
by rider or supplemental policy provision, unless such term insurance benefits are
disregarded under section 10-7-306, shall be equal to: The adjusted premiums for
an otherwise similar policy issued at the same age without such term insurance
benefits, increased, during the period for which premiums for such term insurance
benefits are payable, by the adjusted premiums for such term insurance, the two
latter premiums being calculated separately and as specified in subsections (1) and
(2) of this section.

(4) Except as otherwise provided in subsection (5) of this section, all
adjusted premiums and present values referred to in this part 3 shall be calculated
on the basis of the commissioners 1958 standard ordinary mortality table for
ordinary insurance and the 1941 standard industrial mortality table for industrial
insurance; except that:

(a) For any category of ordinary insurance issued on female risks, adjusted
premiums and present values may be calculated according to an age not more than
six years younger than the actual age of the insured;

(b) In calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, in the
case of ordinary insurance, the rates of mortality assumed may be not more than
those shown in the commissioners 1958 extended term insurance table, and, in the
case of industrial insurance, the rates of mortality assumed may be not more than
one hundred thirty percent of the rates of mortality according to the 1941 standard
industrial mortality table;

(c) For insurance issued on a substandard basis, the calculation of any such
adjusted premiums and present values may be based on such other table of
mortality as may be specified by the company and approved by the commissioner;

(d) All calculations shall be made on the basis of the rate of interest
specified in the policy for calculating cash surrender values and paid-up
nonforfeiture benefits. Such specified rate of interest shall not exceed three and
one-half percent per annum; except that a rate of interest not exceeding five and
one-half percent per annum may be used for policies issued on or after July 1, 1977,
and except that for any single-premium whole life or endowment insurance policy a
rate of interest not exceeding six and one-half percent per annum may be used.

(5) (a) In the case of industrial policies issued on or after the operative date
of this subsection (5), as defined in paragraph (b) of this subsection (5), all adjusted
premiums and present values referred to in this part 3 shall be calculated on the
basis of the commissioners 1961 standard industrial mortality table and the rate of
interest specified in the policy for calculating cash surrender values and paid-up
nonforfeiture benefits. Such specified rate of interest shall not exceed three and
one-half percent per annum; except that a rate of interest not exceeding five and
one-half percent per annum may be used for policies issued on or after July 1, 1977,
and except that for any single-premium whole life or endowment insurance policy a
rate of interest not exceeding six and one-half percent per annum may be used.
However, in calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates
of mortality assumed may be not more than those shown in the commissioners 1961
industrial extended term insurance table and except that, for insurance issued on a
substandard basis, the calculation of any such adjusted premiums and present
values may be based on such other table of mortality as may be specified by the
company and approved by the commissioner.

(b) After April 9, 1965, any company may file with the commissioner a written
notice of its election to comply with the provisions of this subsection (5) after a
specified date but before January 1, 1968. After the filing of such notice, then, upon
such specified date (which shall be the operative date of this subsection (5) for
such company), this subsection (5) shall become operative with respect to the
industrial policies thereafter issued by such company. If a company makes no such
election, the operative date of this subsection (5) for such company shall be January
1, 1968.

Legislative History

Source: L. 61: p. 462, � 5. CRS 53: � 72-20-5. C.R.S. 1963: � 72-19-5. L. 65: p. 770, � 1. L. 77: (4)(a), (4)(d), and (5)(a) amended, p. 524, � 3, effective July 1. L. 81: IP(1) amended, p. 544, � 3, effective July 1.